All of the following refer to potential ways management can manipulate earnings using their discretion under U.S. GAAP except A. Big Bath Accounting B. income smoothing C. changing accounting methods D. Asset write ups
Writing up assets is generally not permitted.
The answer is D… but what would be the benefits of increasing the book value of your assets??
Because then you’ll have more assets with the same liabilities so your owner’s equity needs to go up in order for L + E = A and for the universe to not implode.
D is not allowed under US GAAP.
CFALondon0109 Wrote: ------------------------------------------------------- > The answer is D… > > but what would be the benefits of increasing the > book value of your assets?? debt covenants perhaps… also if you write up inventory, you’d essentially be writing up COGS when the inventory is sold… thus report less income, pay less tax